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tv   The Pulse  Bloomberg  April 17, 2015 4:00am-6:01am EDT

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francine: no special treatment for grace. christine lagarde says she won't support the country with a debt payment. battle for number 10. we get the final jobs data before the u.k. elections. and, the death of tv dinners. nestle suffers from weak sales of frozen food in the u.s. welcome to "the pulse" live from bloomberg's european headquarters in london. i'm francine lacqua. the international monetary fund managing director, christine
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lagarde, warned that she wouldn't let greece slip a debt payment. >> the new reality could be the new mediocre. if policy makers finance ministers, and governors of central banks do not address the risks we have on the horizon, that new reality -- on verizon. that new -- on the horizon. that new reality could look a lot better. francine: she was talking about the new mediocre. that is a response to the stagnation we had from the former treasury secretary. she also talks about this payment to the imf. she said she would not only encourage it, but she would be disappointed if they did have to delay it. the country is running out of cash as it is locked in talks with creditors to release aid. those bailout talks at those
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talks, yanis varoufakis was insistent that he was willing to compromise, but he would also stand firm on not crossing the government's redlines. >> we will compromise. we will compromise, and we will compromise. but we are not going to end up being compromised. francine: yanis verify chris still in washington, d.c. today. let's get more on greece's debt saga. we are joined now from greece by our athens bureau chief. are we getting any closer to some kind of agreement? i think we are having technical difficulties. we will get back to you in just a second. connectivity not our strong point today. we will talk about what greece has to do, the imf response.
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i am joined by jim one of our editors at large. he has covered the european economy for decades. jim: not decades, but almost as long as i can remember. francine: thank you for coming on. this is actually quite recent. it has only been this week that we've had a little bit of jitters on the market. why now? jim: because the crucial repayment dates are coming up and greece has been complaining -- people have been concerned about greece for running out of cash for two months now. they have pointed to march as the dropdead date. every week, they are getting antsy. there is really no hard data. whatever happens this month, next month, the key, there has to be a settlement by the summer. there's massive bond repayments due to the ecb in july.
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whether it is may june, they may still be able to struggle through, but july is when it hits the fan. francine: as reporters, we follow every move in the negotiations. you speak to investors and ceo's and they say it is very difficult to model for a possible greek exit. i'm not sure what a default would mean. maybe it doesn't make that big of a difference. if you are a player in the market, what do you do? do you follow the political in-out or assume that we are going to stick together? jim: i don't want to tell people how to do their jobs. you have to follow the in and out because the markets move on that. in terms of the fate of greece as someone who's covered it since -- francine: long time? jim: for a while. it is not a political story. the person you need to keep your
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eye on is angela merkel. it seems hard to believe that she would want her legacy to be i let the eurozone, i let the euro, i let the peak of european postwar integration crumble because of a few billion euros in greece. maybe that will happen but that's the bottom line. there's a long way between greece missing a payment on technical default or some sort of fine print being missed, a long way between that and exiting the euro. there are many incremental steps where they can save the baby. whether it is capital controls or something else. ultimately, it is a political decision. francine: so far what angela merkel has been saying is, we won greece in the euro. this is interesting. we are getting a sense that the european economy is starting to get green shoes.
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jim: yeah. at least in the markets. this is what happened in the u.s. the equity markets anticipated an economic recovery and that is what happened. you may see that in europe. but the potential growth in europe is much lower because of the structural issues that you hear about. when people throw parties over 1% growth -- francine: that says it all really. we are doing so well. but we are compared to know growth. jim: you need more growth to bring unemployment rates down. francine: jim, thank you so much. jim hertling, one of our editors at large. we also want to look at u.k. figures and the impact they have on the election. that brings us to today's twitter question. is the ecb's qe protecting week companies?
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with this blanket of qe, a lot of investors are saying it is. tweet us. here's a look at what else you need to know on this friday morning. u.k. unemployment figures are due out this hour. we will get the february unemployment rate. staying with the election, leaders of u.k. opposition parties have taken part in the latest pre-election debate. the debate took place without david cameron or nick clegg. a poll conducted after the debate showed labor leader ed miliband coming out on top. the world's biggest food maker reported first-quarter revenue growth that exceeded analyst estimates. nestle saw growth rise 4.4% thanks to improved european sales.
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the company still faces a slowdown in china and is looking to rebound its frozen food business in america. still i had, the death of tv dinners. we will look at nestle's lien sales in the u.s.. at 9:30, we have the jobs data in the u.s. we will talk to the man behind headphones and speakers. stay with us. we are just getting started. ♪
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francine: welcome back to "the pulse" live on bloomberg tv and radio. christine lagarde says she won't let greece skip out on its next debt payment. she spoke to bloomberg in d.c. she also spoke about the divergence of developed countries versus emerging markets. >> two options. the new reality could be the new mediocre. if policymakers, finance, and governors of central banks do not actually address the risks that we have on the horizon. that new reality could look a lot better both today and tomorrow if they address those risks. let me explain what i mean by today and tomorrow. today, we are seeing recovery coming along. forecast 3.5% this year 3.8% next year.
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but, it is not strong enough. and it is very uneven. you mentioned china slowing down. we could have mentioned russia in negative territory as well. we have a diverse picture at the moment. with advanced economies doing better, some of them a lot better, u.s. is strong and we see it staying strong, u.k. is doing quite well, the euro area is picking up some growth but we are also seeing in this emerging market world very slow movers, which is unusual, because they still represent 70% of the growth we are expecting. it is critical that they all work together. tom: i can go right to harvard university. the argument between ken rogoff and larry summers over the secular stagnation identified -- are you towards the optimism, or
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is there some value to what professor summer says about secular stagnation? christine: it gives us the impression that you are stuck. and you are not going to get yourself out of the hole. my new mediocre is a risk, but it is one that we can get out of together. if we take the right measures if we adopt the policy makers to each country's specificity. what we have today is a world where you don't have all the advanced economies in the same pot. this is going to probably tighten soon in the u.s. whereas it might be expanding in japan and europe. completely specific in that category. monetary policy has to be specific. fiscal policy has to be smart. it cannot be tighten or expand. it has to be adjusted to the
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characters of the country. tom: is greece removed from getting a free pass from the imf, or is greece going to go the other way and say no? which isn't a going to be with greece? christine: you are very well informed, tom. those countries have the benefit of delays approved by the board. 30 years ago, they were developing countries. we never had an advanced economy actually asking for that kind of thing, delayed payment. i very much hope this is not the case with greece. i would not support it. francine: for more, we are joined by the jpmorgan head of strategy for european equities. also with us is bloomberg's jim hertling. thank you for joining us. in this world where you see investors shifting a lot more on the european equities and you have qe, it seems that you
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cannot by european equities. >> i think that is a very optimistic view. there is more going on than just qe. you've had a recovery of the european economy building up for the last six months. unemployment is coming down but it is moving in the right direction. you have a recovery in the periphery particularly those countries like ireland portugal, and spain. francine: do you stock pick or do you look at -- if i want to make money you don't have to stock take anymore. you can just look at industries are country by country. stephen: i think it is a better environment to stock pick now. one of the key trends you saw in the last 4-5 years was, anything with a bond proxy did well. the momentum was all in these high-quality defensive names that were viewed as long
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duration. now, it is much more about what is going on on the ground where we are seeing the recovery in earnings, where is the momentum coming through. francine: jim, we were talking about this. q is basically a blanket for everything in europe. jim: one of the things, when we talk about the greek crisis reemerging, the euro crisis reemerging a little bit, are you concerned that it is also an imminent financial crisis? would you be avoiding banks and financials even with qe because of concern that greece may reemerge? stephen: we think that the game changer for the banks came last year. the u.s. and the u.k. have conducted stress tests of their banking system and recapitalized. europeans came relatively late to that party but i think they did a good job when they did it. the stress test was pivotal.
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the product of the stress test was that europe suffered a second credit crunch. you had the credit crunch in 2000 9-10, and another credit crunch as banks changed their lending behavior. that is done now. banks have been recapitalized. in many cases, they are well capitalized. there is still pressure in some cases to raise capital further. but the lending behavior is changing. francine: that's absolutely right on paper. the problem is, you don't really know what the domino effect is. do you model a greek exit, or is it just something that we shouldn't be looking at at this point? stephen: it is very difficult to model. our view is that greece is not going to exit the euro. this is still in negotiation. it is a very difficult negotiation. i think if you went back to the
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election, i think the greek people were presented with, i can negotiate better than the institutions. we can reduce the debt and we can stop fiscal tightening. the greek people said, fine, give it a shot. now he is trying to push those things forward. unfortunately, i think the three things are incompatible. i also think europeans are way more flexible about debt restructuring than the message they are currently giving. i think if you look at the way the eurozone crisis has developed, in every case, what you've seen is, in return for firm action, you've got concession. francine: that's been said quite clearly, although i don't know how many people have looked into it, by the commissioners. jim, we've talked so much about oil in general. it seems that we are staying in the range of $50-$60. jim: the stock prices have
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clearly -- they were the major underperformers of the last six months. it is impossible to forecast where the oil price is going from here. i think the royal dutch bid for bg group was very interesting. as investors, we look at these financial aspects. when you get to a situation where the industry itself is saying, it is cheap enough for us to buy them, you are looking at asset values in the longer term that change the perspective. francine: thank you for joining us. jim hertling and staying with us, more from stephen macklow-smith from jpmorgan after the break. ♪
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francine: welcome back to "the pulse" live on bloomberg tv and radio. let's get some corporate news. nestle has reported first-quarter revenue growth beating analyst estimates. sales rose 4.4%. for more on all this, we are joined by ryan chilcote. they are not doing too badly overall. the frozen food in the u.s. is not doing great. ryan: that is a pretty compelling part of this story. there are big issues with lean cuisine. in general, with frozen food in the united states and with
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nestle in the frozen food space, lean cuisine specifically, their frozen food that is supposed to be calorie minded, it has been very challenged. this is a commercial from the 1980's that aired on british television when lean cuisine was introduced. francine: look at the dancing. ryan: this is when they were going to take on weight watchers. lean cuisine means you don't consider yourself obese, you just don't want to become obese. it opened up a. now people that are conscious of their weight are also conscious of the fact that they should be eating fresh food. you've got all these new brands challenging the frozen brands from nestle that are getting a lot of traction with consumers. hip brands that say, we are using all these super foods. that poses a challenge for nestle. francine: china is also challenging. ryan: instead of sales growth, they had sales construction --
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sales contraction. that is one of the major stories. francine: we will talk about all these big food companies that emerge in europe, but our global story, we are back with stephen macklow-smith. we are talking about the environment overall. how much is nestle an fx story? stephen: at the moment, it is very impacted by what the swiss national bank did in january. if you look across europe, most european exporters most are going to see the major impact from euro weakness this year. if you look at the way the euro moved, it peaked in april-may of last year. it was down 3.5% year on year at the end of 2014, then there was a decline in the first quarter of the year. as of now it is down 12% year on year. as long as it stays on this level, that tailwind remains.
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ryan: if nestle says they lost about 4.5% in the first quarter, basically taking the money they made overseas and transmitting it back into frank's, unilateral said over that same period, they gained 10%. what happened with unilever in terms of currency fluctuations? stephen: here you have the second impact. the first impact is translational. what you are seeing across europe is a lot of exporters who compete with companies based in dollar areas suddenly being given a competitive advantage. what we are hoping will result from that, given that you have credit recovering, is that those exporters will view an opportunity to reinvest in their business and start to invest in growing their competitiveness. francine: where do you see the biggest deal, stephen? we talked about the financials, the oil makers, the impact of
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fx. if you are a european investor where should i park my money? stephen: our view is that if you are a long earning investor, you save a little cash for a rainy day. broadly speaking, we think that over the year, there's enough good news coming out of europe that markets can progress higher. valuation over the short term is a slight concern. earnings are so depressed. we think there's every reason to expect those earnings well start to grow on a structural basis. francine: thank you so much, stephen and ryan. coming up, we will be talking u.k. unemployment. we are minutes away from the release of jobs numbers, the last glimpse into the employment picture in britain before next month's general election. let's look at the pound. it is all about wage growth. few have had an increase in salary. that would maybe mean that you
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would vote for the party in power. look at that pound-dollar 1.4973. we will talk about exports and u.k. employment data coming up next. ♪
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francine: welcome back to "the pulse" live from bloomberg's european headquarters in london. i'm francine lacqua. we are getting breaking news out of the u.k. we have unemployment figures. let's pull out the pound for you and hopefully they should be coming any second. this is a picture for pound-dollar. there is a huge interest in unemployment figures. the latest numbers from the u.k. undoubtedly look rosy. 5.7% unemployment figures. a lot of european countries
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would be very happy. overall, we've had some 2 million new jobs and's mid-2010. i believe we are getting those figures as we speak. 29,000 -- 20,000. 20,700 jobs have been created. they have been created for the month of february. this could play out in the election story. we are not seeing wage growth, which is what a lot of economists say we should focus on to see whether voters should vote for the tory or labour party. for the moment, that jobless came little better than -- that jobless claim a little better than expected. anna joins us. stephen macklow-smith is still with us. anna: we are seeing a continued focus on this job story in the u.k. election campaign, a focus on the long-term economic plan.
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wanting to point to the strength of the economy, the recovery, and the actions the conservative cgovernment and their partners have taken to get the job figures to look better. and they do look better. this plays into a much broader conversation about workers rights. all of that is very topical. francine: and we also have a debate. we have the unemployment figures, wage growth although we don't have that figure today and that debate yesterday. anna: the focus going into that, there wasn't much to talk about the economy. david cameron was in there. nick clegg was in there. it was an opposition party debate. the focus on ed miliband. this was a key exchange. everyone is trying to work out how much cooperation we might see between them if we get the labour party getting more votes or more seats than the conservatives.
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this is some of the sound we got. >> is it the case that you would rather see david cameron go back into downing street then work with the snp? [applause] >> the difference is i've thought tories all my life. unlike your leader, alex salmond -- and unlike you -- [inaudible] >> don't turn your back on him. francine: so there. highlighting a key dynamic in this debate. the labour party has ruled out a full coalition with the snp, but how much cooperation could we see? that could be crucial in whether
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labor can form a government after may 7. francine: we are getting some breaking news. a three-month wage increase. if you look at the health of britain plc, what does it tell you about the equity markets? are we going to see more volatility? as anna was saying, it is unclear who will govern. stephen: it is extremely difficult to call. you have seen erosion of support for centrist parties which is analogous to what you see in other european countries. on the economy, you had an upward revision to first quarter gdp. growth appears pretty well anchored. assuming that we can arrive on an accommodation after the election that brings stability of government -- [indiscernible] francine: we had that wage growth. although they didn't speak to that in the debate
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unemployment, housing, the main issues. anna: that is some of the focus. that from the conservative party. we are hearing the positives about the economy. ed miliband trying to cast doubt on those statistics. trying to cast doubt on those unemployment figures, trying to suggest that the jobs that have been created are not full-time jobs. the conservatives kicked back at that. another theme coming from the debate last night was about foreign policy. i thought this might be interesting. ed miliband took another opportunity to mention his intervention on syria, that he says helped to reshape president obama's attitudes toward syria and reshaped the actions that the u.s. were taking. that struck me as a fascinating move. this is the second time he has taken to mentioning this. i think we have some sound of that. >> we can't have the world on
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its own with the united states. at the same time, we can't withdraw from the world. in 2013, david cameron came to me and nick clegg and said they wanted to bomb syria. they hadn't thought through the consequences. it wasn't a last resort. i said no. as a result, the british parliament said no and president obama decided not to go ahead. anna: ed miliband stepping into the foreign policy arena that he thinks perhaps he needs to. interesting to look at who won this debate. we did get one instant poll afterwards talking about who had one bank. the verdict in that poll was that ed miliband had done best and that nigel farage had come third. francine: it was a good debate. steven, when you look at the uncertainty, is -- are there one or two sectors that you would
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invest in at the moment? something is going to change. i'm thinking of housing. stephen: housing has become something of a cloud. people are concerned about the impact of a labor implementation of non-dumb policy on the market. the fundamentals are still sound. there are unfortunately not enough houses being built. there is a mismatch between demand and supply. with unemployment coming down and real incomes rising affordability is still good. francine: stephen, thank you so much for joining us. stephen macklow-smith from j.p. morgan asset management and anna edwards. later, we will speak to the u.k. work and pensions secretary. we will talk about those jobless claim numbers. stay with us for that interview. here are bloomberg's top stories. u.s. banks citigroup and goldman
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sachs posted their best earnings in years. citigroup saw the highest profit since the onset of the 2008 financial crisis area goldman sachs reported its highest earnings-per-share in five years, with all major business areas beating analyst estimates. 43 of the world's biggest companies, including ikea, hsbc has sent a open letter encouraging steps to curb fossil fuel pollution. they encourage functioning in a low carbon economy. the businesses expect an agreement to be reached at the end of the year. cutting 11,000 jobs due to falling oil prices combined cuts will shrink the workforce at the world's largest oil field services provider by 15% compared to the final quarter of last year. the wall street heroes of
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thousand seven may be making a comeback. goldman sachs brought in more than $1 billion from equity investments. while citigroup posted its biggest quarterly profit since the financial crisis. that was helped by the ceo's push to cut costs. for more on the u.s. bank earnings, we are joined by bank analyst chris wheeler. great to have you on the program. give us a sense of what you make of the earnings season so far. chris: i think we saw some really clean numbers. litigation charges were there, but were pretty small. we got a chance to understand the direction the banks are going. we also saw very different performances in investment banking revenues between wells fargo, between j.p. morgan, goldman sachs, and citi. quite a mixed bag. francine: the different banks
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also had different models. chris: obviously investment banking has come back in the first quarter. the banks which have done well you saw both goldman sachs and jpmorgan on the back of that. credit has been week. that hit bank of america and citigroup yesterday. equities pretty robust as well. in traditional u.s. banking pressure, because margins continue to come down on the back of a very low interest rate environment. everybody is waiting for that moment when the fed pulls the trigger on the rate rise. francine: is that going to make the difference between the men and boys? if you get that wrong, it will have an impact on earnings. chris: one of the problems i had is that everybody is talking about the impact of a 100 basis point rise in rates. the clients i'm talking to are questioning whether you will see a rise at the short end.
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at the long end, we don't know what the impact of rates going up is going to have on things like loan quality and loan demand. we have been sitting in these low rates for so long. we have never been in this situation before. we have no place to judge. there is doubt, when rates go up, the banks will get some benefit. francine: and you are expecting them to be very slow, because the interest rate rise, we don't really know the impact on certain loans they've been dishing out. if it is very gradual, the banks can i just did his new environment. chris: what banks like is for rates to move around. that gives them a chance to play. i think the other factors, we are not going to see a sudden spike in interest rates. it will be slow. maybe 25 basis points this year.
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i'm not an economist, but that's what people tend to expect. what you will then see, if rates pop up more next year, you will see a gradual improvement. the big debate about pushing away deposits. some of the deposit-rich banks particularly j.p. morgan, are hurting despite getting more deposits in. the impact on margin is negative. francine: are you still concerned about fines? or are we focusing more on -- are fines linked to leaks in europe? chris: probably only $2 billion this year for citi. in 2006, we would have fallen out of our chairs. i think we are looking at the tail end of libor and foreign exchange. there's going to be a lot of third-party actions as people come back and sue the bank rather than it being the department of justice. but it looks promising. francine: chris, thank you so
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much for coming on. chris wheeler, our bank analyst at atlantic equities. bloomberg has confirmed, there has been an announcement -- an outage this morning that has affected the bloomberg terminal. we will give you more of formation as we get it. we will speak to the headphones fashion house. as we go to break, take a look at the newly released trailer for the upcoming "star wars out the preview -- "star wars." the preview has had almost 2 million youtube views since it was released yesterday. ♪
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>> a movie like "goodfellas" would be made differently, i suppose. marty and i are working on a film -- i hate to talk about it but we are doing a film like "goodfellas." francine: welcome back to "the pulse." that was robert deniro speaking
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to bloomberg at the tribeca film festival. the maker of martial branded headphones and speakers is taking on the likes of apple's beats. the swedish startup is looking into expanding into smartphones. for more on this, we are joined by the president and cofounder in a bloomberg exclusive. thank you for joining us on the program. this is rather exciting. you want to go after the big guys. basically, you are saying, we are hip, we are cool, and this is what people want. we are going to do also smartphones. >> we want to own the whole ecosystem, to have a really good user experience. if you love music, we should be the ones that you should be using. francine: my question would be when we have apple, that is really dominating that space. is there really space for a second person? do you think the market is going to increase? >> i think it is like where
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headphones work 6-7 years ago. you had to be able to listen to music. when the technology stagnated, where you could have both fashion lifestyle and a better user experience as well as good listening, you were starting to have more fashionable headphones. i think that the smartphone is in an area now where technology kind of stagnated and it is time to have some more fun smartphones for you. we are also bringing technology. we have seven unique selling points. francine: i'm looking at some of the -- this is kind of like retro cool. is this what you are playing out? is this the anti-apple? >> we sell a lot of products like apple. they are a partner to us. i'm not sure they will sell our
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phone, but they do sell our accessories. i wouldn't say -- when apple make a phone, they look at a target of 50% market share. when we create this phone, we are looking at the niche market of people who like music. we are happy to take 3%-5% of the market. >> who are you developing the phone with? you have a prototype which i can't say. it will come out in august. where are you selling it? how many are you expecting to sell? >> we are targeting to sell 100,000 pieces in q3 and q4. it is very limited. we already sold almost 30,000. francine: this is on preorder? >> yes. and we have demand for much more but we don't want to flood the market. we want to be in that space.
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francine: smartphones are difficult. the technology is really a trust. it is something you have on you all the time. konrad: everybody is fighting about technology. what we are doing is we take the smartphone by default because your brain cannot take more technology. then we are adding feelings to the product with the brand name. francine: soft value what soft feeling? it looks good. konrad: kind of, if you put an lg phone on the table, i don't think you would get further with that girl you are talking to. francine: this is a pickup smartphone. this is what you are trying to target. konrad: what we did, when we developed this, we looked at the community rather than the
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technology. if we want to target this community, what do they need? if we want to go after the music community, how do you listen? how do you perform better? how do you create music and how do you record better? francine: how much can i buy your phone for? konrad: it is in the 500. francine: and you have partnered with who? is it a big company? konrad: nokia, with microsoft, they had to lay off some people unfortunately. some people also left. we got the team in finland. these guys have been building more than 100 phones together. we have a very good team on the technology side. on the software we are partnering with some of the best in the industry. so sound is kind of doing the
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marketing. then we have different partners. when we started sound, it was eight founders. we don't want to exclude. we want to do good things together. francine: great business model. konrad bergstrom, president and cofounder of sound industries. coming up, we will take you to the top market show in monaco and tell you about a supercharged electric car. ♪
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francine: most luxury sports cars don't get off the ground before showing off a concept to the world's richest. that is what a finnish company has done at the market show in monaco. the car has a few distinguishing features. tom gibson takes a closer look. >> we remain quite quiet about how it is done. two years ago, i made a question to my colleagues, could we win a 24 hour race with this car? we came up with the result that it could be done. every day is a priority.
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back to basics. it is all carbon. [engine revving] >> felt like an airplane. >> yes. we have a rapid factory swap system on the car. the car follows the new one. the empty batteries will be left behind. the powertrain is unique. we can upgrade the battery chemistry easily, but we don't need to touch the car. the car lives its own life and the battery lives another. we put the whole car together, tested the engine. everything works. we think somebody would throw a lot of money at it.
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we could possibly be here next year, showing how the production car would look like. francine: that looks like a pretty impressive car. for those listening on bloomberg radio, the first word. for us, we are next. ♪
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francine: no special treatment for greece. christine lagarde says she will not have the company missing -- country missing a debt payment. we will talk about numbers with duncan smith. weak sales of food across the u.s. good morning. ♪ francine: good morning to our viewers in europe.
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good evening to those in asia. a warm welcome to those waking up in the united states. bloomberg has confirmed there has been an outage this morning that affected the bloomberg terminal. bloomberg is investigating and we will update you with more information as we get it. we are getting more figures from the eurozone. we are in deflation. let's check on euro-dollar. it has been disinflation so far. euro/dollar 1.0826. christine lagarde warned that she would not let greece miss a debt payment. >> the new reality will be new mediocre if governments and central banks do not address the risk we have. the new reality could look a lot better both today and tomorrow
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if they address those risks. francine: that was christine lagarde talking about the outlook for the world economy. she spoke about that, about emerging markets, about federal reserve's. she was also speaking about payments greece owes the imf next month. the country is running out of cash as a remains locked in talks with its creditors. that is something we have been talking about for the last couple of weeks. it seems that the markets have really caught on and are starting to feel some jitters. on the bailout talks, the greek finance minister was adamant that he would be willing to compromise. >> we will compromise we will compromise, and we will compromise in order to come to a speedy agreement but we are not going to end up being compromised. francine: he is still in
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washington dc today and is set to meet with ecb president mario draghi and the u.s. treasury secretary. we are from greece by our athens bureau chief. are we any closer to an agreement? >> not really. we have the finance ministers saying he wants a speedy agreement. and yet they have set another deadline. they are trying to pave the way for the disbursement of the next transfer of bailout funds. the list the government has presented so far has been seen by creditors as unsatisfactory to put it mildly. the truth is, we are not getting any closer to a deal and it is highly unlikely that we will get there.
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the differences will not have been breached by next friday. francine: how much time does greece have before defaulting? we cannot really get a firm figure on this. we don't know how much cash they have. we don't know what they have to make the disbursements. >> greece, in a sense greece has already run out of cash. it has only been kept afloat thanks to the use of the reserves of the pension funds hospitals, state enterprises, and other public entities, like local governments. obviously, this internal recycling of cash cannot go on forever. we expect available buffers to be exhausted by sometime in may,
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most likely on may 11th, when the country will have to repay the imf loan of about 750 million euros. francine: to grexit or not to grexit? >> grexit is in no one's interest. both the prime minister and the government have said it is not their intention to leave the euro area. the euro area governments have said that they want to keep greece in the euro area. the breakup or the creation of a failed state in the middle of the mediterranean is in no one's interest. the baseline scenario is that we will reach an 11th hour agreement. before we get there, we are set to see a lot of brinkmanship drama and diplomacy.
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francine: thank you so much. for more on how the markets are interpreting the ongoing greek negotiations and the latest eurozone inflation numbers -- i have to issue a correct. in february the figures are down 0.3%. i said they were flat. if you look at the inflation figure in a certain way, a low oil price is not bad. but inflation is starting to be a worry. >> in this regard, the low oil price is a mixed blessing from the ecb's point of view. they welcome the positive impact that the low oil prices have on the eurozone recovery. in the short term, there was a
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concern that low oil prices might drive inflation lower to destabilize inflation expectations. inflation is expected to continue to recover over the next couple of months. the numbers would still be very low in the second quarter. by the end of this year, we should be closer to 1%. francine: this is the kind of scenario that mark carney in the u.k. was also foreseeing. if we talk about this recovery one percent growth, 1.5% growth nothing to write home about -- we will take it here in europe thank you very much. >> 1% growth is better than no growth is better than contraction. unemployment is still way too high in key economies -- france and spain, for example italy is still a basket case. 1% keeps you out of intensive care, but it does not keep you out of the hospital. francine: that is a very good
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way of putting it. what does it mean for the economy as a whole? can we say it is getting better? can this very fragile recovery grind to a halt or reverse? >> we can see growth in europe of about 1.6% this year and 2% next year. it is a cyclical recovery. it may be temporary. low oil prices, the moderation in fiscal austerity, improved banking -- the real issue was whether the europeans will use the time to enact structural reforms which will enlist growth potential on a long-term basis. francine: what happens if greece were to leave the euro? that is not really anyone's central case. we say they are much safer now and do not hold as much great debt, but we do not know the
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implications. we don't really know the people that fear would have. or that banks would have. >> it is obvious that while the grexit would greatly increase the uncertainty in the banking sector it is also important to say that with the cleanup work in the european banking sector, work related to the asset quality review the recapitalization we see in the banking sector is bearing fruit. the conditions for bank lending should improve readily overtime. that is something we have seen this week from the ecb. francine: the grteexit is a political decision at this point. >> absolutely. what you are saying is that europe is on track to successfully shelter the banks? >> i think the vicious link between the bank and the sovereign is not as close as it
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was in mid-2012. that is good news. there is still a bit of a link. with greece most of the debt is to the official sector, no longer to the private sector. that is very important. francine: guys, thank you so much. stay with us. we will have plenty more to talk about in a couple of minutes. join the conversation on twitter . tweet us. guy johnson is off today. here is a look at what else is on our radar. jobless claims fell by 20 700. we will talk about the numbers with iain duncan smith coming up at the bottom of the hour. leaders of the u.k. opposition parties have taken part in the latest pre-election debate.
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a poll conducted after the debate showed labor leader ed miliband coming out on top. the world's biggest food maker reported revenues that exceeded analysts' estimates, thanks to improved european sales of its chocolate and bottled water. it faces slowdowns in china and is looking to revamp its presence in north america. still ahead, the battle for number 10. who came out on top after last night's election debate? we will talk to the works and pensions secretary iain duncan smith. we will speak to the president of emirates, tim clark. before we go to break we want to give you an update.
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bloomberg has confirmed there has been an outage that has affected its terminal and we are still investigating the issue. we will invest -- we will update you with more information when we get it. ♪
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>> we never heard them asking for that kind of thing. i very much hope this is not the case with greece. i would certainly not support
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it. francine: that was the imf's christine lagarde the spoke with tom keene. you talked about greece and she was pretty harsh. she said there is not going to be a delayed payment. tom: there was some new drama. to be in the may nature he him and hear the press conference with this singular new wants -- new atrium and hear the press conference with this singular nuance. then we advanced the discussion. what kind of nation is greece going to be? are they going to be treated as part of europe or as a weaker, developing nation. no doubt about it, her analysis
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is that greece needs to pay the bill on time and that they are part of europe. francine: to your point and her point, we have never had a developed country ask for so much assistance from the imf. we have never had interest rates so low or negative yields. wish he a bit baffled about what is going on in the world? to -- was she a bit baffled about what is going on in the world? tom: there is no question that the excellence is there and she is not baffled. the number one tension was with harvard. ken rogoff was relatively optimistic about a good outcome for europe. larry summers was front and center in the different debates they were having worried about stagnation. that is maybe what christine lagarde his bathrobe -- is
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baffled about. francine: in davos, she was one of the lonely voices out there. it seems like she may be proven right. tom: we will have to see what happens in the united states. her singular point is that we have major central banks going sequentially in order, rather than altogether. when the fed raises rates we will still have a euro and japan that are hyper accommodated. francine: thank you. tom: sure. francine: when we hear what christine lagarde has to say she is saying there will be no delayed payment from the imf to greece.
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do we care about these day-to-day negotiations? >> in the end if greece cannot pay its debt, the next question is whether the ecb will continue to extend emergency liquidity to the greek banking sector. that could lead to the introduction of capital controls. it is important to say that all of this would be because negotiations do not proceed. the impact would be quite bad. while we think the best case scenario is that greece will stay in the eurozone the overall situation would not get easier. francine: what is your take on the euro? >> we believe that there might be more room for the euro to
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weaken in the short term against the dollar. over time, as european growth except, as european -- picks up as european inflation expectations pick up there will be room for the euro to recover. francine: overall, this is going to help exporters? we are still talking about small structural reforms in spain. the big reforms we were promised in italy and other countries are just not there yet. >> i think you have put it quite right. we are buying time with the help of the extremely accommodative monetary policy come a weaker oil prices, the moderation in fiscal austerity -- monetary policy, weaker oil prices the moderation in fiscal austerity.
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we need to reduce rules and regulations, the red tape to ease business conditions so that investment and broader confidence return in a more lasting way. francine: how concerned are you about political risk? >> i think it is the key risk this year. this will be a very relevant theme. francine: thank you so much. the closest election in a generation. anna edwards will be her shortly for an analysis of what happened in the tb -- tv debate in the u.k. ♪
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francine: welcome back to "the pulse." let's turn to u.k. politics. anna edwards joins us. anna: there is this story about the long-term economic plan the stress on the u.k. economy related to whether g7 countries. the labour party looks at these numbers and suggests that all is not as it seems behind the headline figures. francine: they have been talking about unemployment issues. anna: labour has been talking
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about contracts. labour says workers do not have enough rights. that is one of the areas of focus. today, we will be hearing ed miliband talk about unpaid internships. we are hearing them talk about working environment once they get to work. francine: we had an election debate without david cameron or nick clegg yesterday. they were not talking about the economy so much. anna: it was in opposition parties tv debate. a lot of focus on the snp, the scottish nationalist party. they are looking to do incredibly well, as opposed to their history. a lot of focus on whether there will be a formalized relationship potential between them and the labour party. that is one way that the labour party could find themselves in
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government. >> is that the case that you would rather see david cameron go back into downing street then work with the snp? [applause] >> the difference is i have fought tories all my life. unlike your leader. we ended up with a tory coalition. you fought labour all your life. >> don't turn your back on it. people will never forgive you. anna: that is nicola sturgeon setting out the snp's case. francine: they also talked about
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defense and foreign policy. >> they talked about trident. ed miliband took another opportunity to try to put across his statement. he believes that he influenced u.s. foreign-policy around syria. did anybody win? there was pulling out that suggested that ed miliband did very well and that nicola sturgeon did pretty well. francine: we will have more on the u.k. election a little bit later. we will be talking about one of the key players. iain duncan smith. we want to update you on some of the issues. bloomberg has confirmed there has been an outage that affected the terminal. bloomberg is investigating the issue and we will update you with more information as we get it. we are back in a couple of minutes. ♪
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francine: welcome back to "the pulse." live from london. i'm francine lacqua. u.s. bankss posted their best earnings in years. goldman sachs reported its highest earnings per share in five years. ikea, dow chemical have penned an open leader -- letter to call
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for climate change, among other companies. an agreement is expected to be reached at the united nations climate change conference in paris at the end of the year. schlumberger is going to cut 11,000 jobs due to the fall in oil prices. the combined cuts will shave job totals by 15%. let's check in on the markets. jonathan ferro has more. jonathan: i will just bring you the updates, shall i? losses across european indices for much of the morning. 0.75% in spain. just dropping lower in frankfurt, as well. off by 0.1%. yesterday, this looked a lot uglier. things are settling down just a little bit.
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grexit risk is once again on the horizon. some ugly stuff. i am going to go to the greek 10-year. yesterday was interesting to me. it was the first time we had that real risk aversion that we saw in 2012 in the bond market. a little bit of divergence. another record low this morning. 0.07%. the spanish yields was moved tire yesterday. -- the spanish yield was moved hiregher yesterday. that divergence, it is back in play over the last couple of days. the average yield in german, negative. remarkable stuff. the bond market is lower in
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germany. the fx market for london, the ftse is higher and the pound is higher. unemployment is coming out roundabout here. it is the lowest we have seen since summer 2008. more vacancies. that points to a tighter jobs market and some decent data for one side of the debate ahead of that election a little bit around the corner. back to you, francine. francine: 20 days and counting. jonathan ferro with your num bers. nestle beat analysts' expectations. ryan chilcote is here with more. nestlé has been struggling because it's frozen food business in the u.s. is not doing well. ryan: that's right.
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people usually point to china as where their problems lie. i think the u.s. story is more interesting, perhaps. you look at organic sales growth in north america. three point 7%. it is trailing behind the global average of 4.4%. specifically frozen foods is a problem. frozen foods, in general. the idea of the tv dinner is one that people are discarding. in the frozen space itself, you are getting a lot of challenger brands that are a little bit hipper and that people are going for. this is giving nestlé a run for its money. specifically, lean cuisine. francine: the problem is it is frozen. if you are going for a healthier
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lifestyle, you don't necessarily want frozen. ryan: you don't necessarily want frozen and you want something with a little bit more flavor. nestlé recognizes the people are looking for something more organic or ethnic. they are trying to bring those into the fold. the other problem is warren buffett and 3g. they are putting kraft and heinz together and that will create the third-largest food producer in the united states. that is just pulverizing the food industry. they are ruthlessly cost and that is also competition. -- they are ruthlessly cost-cutt ing and that is also competition. sales are contracting by 0.2%. they still think they can get back on track. they are trying to appeal to a younger audience in mainland
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china. through better chocolate and better coffee. this press so -- nespresso is looking at more competition. that is one of their brands. their water business in europe is doing better than they thought. that is helping to balance out some of the losses. francine: still to come, we will be talking to one of the key players in the conservative campaign, iain duncan smith. we want to let you know that bloomberg has confirmed there has been an outage this morning that has affected the terminal. you probably know this. bloomberg is investigating the issue. we are on top of it. we will update you with more information when we get it. ♪
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francine: welcome back to "the pulse." live from london on bloomberg tv. the billionaire founder of go pro is the highest-paid boss of a u.s. company. he was granted stock units valued at $284 million last year. the business operates more than
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-- it is an episode sony would rather forget. thousands of documents will live on in a searchable archive. now, let's get more on the u.k. election. we just had the latest jobless figures. the office for national statistics says employment continued to rise, hitting a new record high. senior conservative iain duncan smith joins us from london. thank you so much for joining us. give us a sense of when you are expecting wage growth to start being more concrete. so that u.k. citizens can live a little better. >> the point you make about the jobs is really cried staggering. we are seeing more people at work than ever.
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also, those claiming and out of work benefit is falling too much lower levels than before. clearly, business, the tax reductions we brought into business has helped. we have seen tax cuts for the poorest paid. your question about the living standards, the take-home pay what we are already seeing actually and have seen over the last few months is pay outstripping inflation. wages for the private sector are running at 2%. that is a 2% gap, really. francine: we have the figures. it is an improvement but that has more to do with the low inflation than wage growth. we have a similar problem in the u.s..
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this is a productivity problem. when his wage growth going to be real wage growth? >> it is real wage growth. it is growing at 1.7% your question is, do you expect to see that grow even faster? the answer is, of course, i want to see that grow faster. we came out of this terrible recession, which was worse in the u.k. then the u.s. we have turned it around and have got people back to work. the second phase is ensuring that business invests more in getting productivity up in those companies. that is beginning to happen and we are seeing the beginning and that turnaround. that will lead to higher wage salaries. we are going to see that rise as those investments are beginning to come through. the investment in the u.k. is very, very good. going forward, we will see it
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happen. as long as the left does not take control, who want to destroy the economy. we will also reduce taxes. that has helped their incomes as well. francine: we look at the inflation data. we look at the u.k. economy on a day-to-day basis. the u.k. has been doing not badly at all, on a whole. it has been doing much better than europe. the imf says it is not that. -- it is not bad. despite this track record, wide we not have the polls putting david cameron ahead? >> i think it is because people were very badly damaged by the last recession and their trust in politicians felt quite dramatically. we had the worst recession in living memory. this is probably the worst recession since the u.k. came off the gold standard. we were worst hit by the
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previous decades. this was a terrible recession. i think people just lost faith in politicians to deliver. it takes time for people to restore their faith in that. what we are seeing more as a large chunk of people saying, i just don't know and i will make my decision later on. what i do believe is that when they come to make their decision they will ask themselves a simple question, do i trust the conservatives to continue this, to improve my chances of unemployment and give me a higher wage? i think the answer will be, yes. francine: at the moment, 40% are still undecided. is it a communication problem that the conservatives have? you are arguing that this is because it takes time, but actually, people are employed. the u.k. is doing well and yet it does not translate to the
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polls. is it a communication problem? is it something that the conservatives need to do differently? >> of course it is a communication problem. no matter what you are communicating to them, if they are undecided, they are not deciding. we are coming out of recession. we still have further to go in getting the economy right. we have another two years until we have eradicated the deficit which is really, really important. that will take a couple of years to go. we are not standing here saying it is all fine and albright and we don't have to worry. that makes it a little bit more difficult to try to assure people that they are better off and as we go forward there are further changes, further reductions in public spending that are required. i am very optimistic about the british economy.
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i think we stand on the threshold of becoming one of the most successful economies in the world. it is quite interesting to compare the u.s. and the u.k. economies. in the u.k., we have a much higher proportion of people in work than in the usa because of our reforms to welfare and sickness benefits, which have people back to work who otherwise would now be claiming to be unable to do work. francine: you were talking about the u.k. being on the threshold. i know it is difficult with 20 days until the election. are you concerned about a high pound? does that worry you? it means that exports will be more expensive and it may possibly be more difficult to do the work here. >> of course i do not want to see the currency suddenly rocket up compared to the rest of europe, which is doing very badly, for the most part. stirling is an area that people want to invest their money in.
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that is a reflection of the strength of the economy and of the relative weakness of many european economies, that are still mired in recession. i would like to see the sterling right fall a little -- rate fall a little bit more. the markets think the british economy is doing well and they are voting for it with their money. i hope when the public looks at that they recognize that most of the rest of the world thinks the british economy is doing well. if you were in france or italy or spain we would give our eyeteeth for the opportunities we have right now. we need to get people to recognize the direction we are going is good. that is the challenge. francine: do we need better work?
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what is the one thing that prides you the most in the last three to four years that leads you to have other policies that are not radically different, but that you would find tune? >> the most important thing about work is to get away from all the political nonsense that has been going on. if you look at the figures that were published today between 75% and 80% of the jobs created our full-time jobs. 60% of them are at managerial level jobs. these are not low-paid, low hours jobs. these are full-time, skilled jobs. 60% of them are taken by british nationals. we are competing with our own citizens with many others from europe, who want to take those jobs. you still need a flexible economy.
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they do give the flexibility for people who don't know how many hours they will be able to do week to week to be able to work and that helps contribute to the economy. on balance, it is about right. more of the jobs are full-time. the vast majority already are. i want to see us finish. we will then have a highly competitive economy with a workforce very keen to work and we will see the productivity writing -- rising as we see business investment. we will deliver that. i think labour are very damaging in their attitude toward borrowing and spending. we will see flight of capital from the u.k. almost immediately. that will raise taxes on the ordinary citizen. francine: how come it is a marxist plot to tell energy
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companies to free their prices but perfectly in line with economic principles? the two seem contradictory. >> not really. i'm not talking about marxist plots. [laughter] >> i'm not a great conspiracy theorist. the labour party came out with a short-term political figure that said we are going to free prices because energy prices have been rising. since then, we have seen energy prices fall. had they frozen prices at that stage, people would be paying more for their energy. we have seen petrol fall, we have seen energy prices fall. i am a passionate believer in all incomes being the operator -- being given the opportunity to own their own home. we want social housing to be available for people if they are living and they can buy at a discount.
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that in turn releases money that you can use to build more homes and we desperately need that. by this move by housing associations which did not allow people to own their own homes, they are no different from the social housing and local government run housing -- they should have the right to buy it. that releases more money and we are committed to at least 400000 more builds of low-cost housing, which is really important. we should see that turning around. come on. i am in favor of people owning their homes. they become more responsible and they care about their communities and they work hard to make sure they can afford the mortgages. that is a very important thing. francine: thank you so much, minister. we have just had some breaking news in the last couple of minutes.
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we have been covering this story at length for you. there has been a large feud inside the company -- we understand that the volkswagen panel is seeking to extend the contract for the ceo. the leadership panel of the supervisory board will propose a contract extension in 2016 for the ceo. emirates has just announced a $9.2 billion order from rolls-royce. joining us from london in his first interview of the day, is the emirates airlines president. great to have you on the program. thank you so much for speaking with bloomberg. we have just heard this rather exciting announcement. is this an indication that you think tghhe neo will never get
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built? >> this is in order for 50 a3 80's. it is 217 engines to power the existing fleet. if the neo gets built some of those aircraft could be in the neo category with a rolls-royce engine powering it. francine: you could convert some of those options for a newer model? >> it is a question of when that decision is made and when they decide to bring it to market. if it falls in the timeline for the delivery of these aircraft than we would look at converting some of those orders to the neo. francine: can you run us through your thinking in this?
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does it also mean you are looking more favorable to the a 350? >> well, this order was won on the basis of a very good business case. also, the engineering qualities of the engine, its fuel consumption, the environmental competitiveness. there are many things that came together. at the same time we are looking at the 350 and the 787, which are powered by the rolls-royce. on two of thsoose, the rolls-royce power is on those. if we decide to buy, there is a possibility that they would be powered by rolls-royce. the two are not linked. tehhe 50 a380's are not linked to
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the contract we have with boeing. francine: was it in any way a u.s. -- in any way to do with attention? >> we don't do that kind of thing. we buy the engines on the basis of the commercial and engineering profit to us. at the same time, we also ordered -- we were a launch customer for engines powered by general electric. that remains in place and it will not change. francine: it is good to have it clear out in the open. tim clark what is your thinking on oil? i know this is difficult to predict. >> sorry. my position on what? francine: on oil. fuel costs. >> fuel costs, ok.
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oil prices -- i have said that the oil prices will remain relatively stable at the prices that they are, given that we have no major geopolitical upheavals probably until the middle of next year. i believe the eurozone will start to energize them because of the qe that has been going on. that point -- in the middle of next year, i believe that the economy in europe, the united kingdom, and america will be energized, so there will be an increased demand for fuel. whether it will get back to $115 per barrel is anyone posco's. my view is that it will get back up to $70 or $80. francine: keep it right here on bloomberg. we will be joined by the other party in this big deal. that is coming up.
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that is it for "the pulse." for our u.s. viewers, "surveillance" is next with tom keene and his team. for those in the u.k. our politics show is up next. follow us on twitter. ♪
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>> this is "bloomberg surveillance." tom: president obama seeks fast-track authority on trade.
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the bill is due to the imf on may 12. christine lagarde says the bill is due. industrial jeffrey immelt and general electric reported earnings. good morning, everyone. this is "bloomberg surveillance." joining me, as always, is brendan greeley. olivia sterns is off today. brendan: republicans are trying to rescue a trade agreement backed by president obama. it is opposed by many of president obama's own party. unions and environmental groups are among those opposed. >> you can make the argument that a trade agreement like this will increase corporate profits. it probably will.